Argentina Looks To IMF For $30B Credit Line Amid Run On Currency

Listen, things have taken a rather dramatic turn for the worst in Argentina over the past two weeks and that’s funny in that kind of way where bad shit is always funny when it’s not happening to you.

As you’re no doubt aware, the central bank recently went the Tony Montana route, hiking rates three times in the space of a week for a total of 1,275bps in an effort to arrest the slide in the peso. But that wasn’t enough as ARS careened to a new all-time low on Tuesday ahead of a rate decision after the close.

It was virtually impossible to get a read on that fucker early Tuesday. As Bloomberg noted, the bid/offer was “very wide with almost no real trades executed” as of 10 EST.

This whole debacle goes back to a poorly communicated December decision to up the inflation target and a couple of equally ill-advised policy rate cuts (in January). Now the chickens have come home to roost and it’s a damn bloodbath, both for the currency and for the bonds, which are plunging:

Needless to say, it doesn’t help that the dollar is surging and that U.S. rates are rising and there’s a very good argument to be made that what you’re seeing in the peso and in the beleaguered Turkish lira are the early signs of an EM meltdown as idiosyncratic stories collide with unfavorable external conditions (i.e., tighter dollar liquidity and an aggressive Fed).

Remember, this is the same Argentina that sold a 100-year bond just a year ago amid the EM euphoria.

To be clear, there is absolutely no telling what comes next here. Folks have weighed in left and right over the past week in a largely futile effort to either call the bottom or, on the other hand, predict more pain to come as the peso is now more volatile than fucking Bitcoin depending on the window you’re looking at.

Writing about a subject is the best
way to educate yourself about it, and when I flick through past work I remember how much
they taught me, if no one else. Mainly they taught me that I didn’t know very much. But they
also taught me that most other people didn’t know much either. Thus, some key themes
which stand out include the illusory control of policy makers, the presumed knowledge of
those looking to them to actively do good, the ease with which we fool ourselves, and how
best to protect capital in the face of such unavoidable uncertainty. -- Dylan Grice